Noble Reports 2013 Results

MarineLink.comJanuary 23, 2014

Noble Don Taylor

David W. Williams

Noble Corporation has reported fourth quarter 2013 net income of $174 million, or $0.68 per diluted share. Results for the fourth quarter included an after tax charge of $36 million, or $0.14 per diluted share, relating to an impairment taken on the FPSO Seillean. Excluding the impairment charge, net income for the fourth quarter would have totaled $210 million, or $0.82 per diluted share. For the third quarter of 2013, the Company reported net income of $282 million, or $1.10 per diluted share, which included after tax gains totaling approximately $63 million, or $0.25 per diluted share. Excluding the gains, net income in the third quarter would have been $219 million, or $0.85 per diluted share. During the fourth quarter of 2012, net income was $128 million, or $0.50 per diluted share. Revenues for the fourth quarter of 2013 were $1.17 billion compared to $1.08 billion in the third quarter of 2013 and $966 million in the fourth quarter of 2012.

Net income for the full year 2013 totaled $783 million, or $3.05 per diluted share, on revenues of $4.2 billion, compared to net income of $522 million, or $2.05 per diluted share on revenues of $3.5 billion in 2012.

Addressing the Company's achievements in the fourth quarter of 2013, David W. Williams, Chairman, President and Chief Executive Officer of Noble Corporation stated, "Contract drilling revenues continued to grow during the fourth quarter with full or partial contributions from three new ultra-deepwater drillships and the first of our six JU3000N high-specification jackups. Building on an exceptional quarter and year of execution in the shipyard, we also saw the delivery of two more JU3000N jackups – the Noble Regina Allen in December, followed by the Noble Houston Colbert in early 2014. These fleet additions, along with the remaining six projects, of which five rigs are expected to complete construction in 2014, are redefining our Company, creating a premium fleet of offshore drilling rigs capable of addressing our clients' most demanding global well construction assignments."

Another significant achievement during the quarter was the progress made toward our planned divestiture of substantially all of the standard capability assets in our fleet. We cleared two key hurdles that place the Company on track to complete the divestiture by the end of 2014, with receipt of the private letter ruling from the IRS and the filing last quarter of a registration statement relating to the proposed initial public offering of the new company. While there is some level of uncertainty around global offshore activity in 2014, this is not interfering with our plans for the divestiture. The divestiture has always been about the strategic importance to Noble – a step necessary to allow the two fleets to be optimally managed and operated, placing both in a stronger competitive position for future cycles."

Contract drilling services revenues for the fourth quarter of 2013 of $1.12 billion improved by $84 million, or 8 percent from the third quarter, due primarily to a 9 percent increase in average dayrates to $212,000 compared to $194,600 in the third quarter. Operating days declined slightly during the fourth quarter due in part to an increase in idle and shipyard days, particularly among rigs in the Middle East region, partially offset by the commencement of operations on the ultra-deepwater drillship Noble Bob Douglas and the high-specification jackup Noble Mick O'Brien , and a full quarter of operations from the ultra-deepwater drillships Noble Don Taylor and Noble Globetrotter II, which began operations during the third quarter. The addition of these new rigs contributed to a $74 million increase in contract drilling operating costs in the fourth quarter to $560 million, compared to $486 million in the third quarter. Contract drilling margin for the fourth quarter was 50.2 percent, compared to 53.3 percent in the third quarter.

Net cash from operating activities was $541 million in the fourth quarter 2013 and $1.7 billion for the full year 2013. Capital expenditures in the fourth quarter 2013 totaled $763 million, including $505 million related to the Company's fleet expansion program. In 2013, capital expenditures amounted to $2.5 billion, including $1.5 billion associated with the fleet expansion program. As of December 31, 2013, approximately $1.9 billion in capital expenditures was required to complete the remaining seven projects in the Company's newbuild program, comprising two ultra-deepwater drillships and five high-specification jackups. Six of the seven remaining newbuild projects are expected to be delivered from shipyards by the end of 2014, including the jackup Noble Houston Colbert, which was delivered in early-January.

Debt as a percentage of total capitalization at December 31, 2013 was 38.0 percent, up slightly from 37.5 percent at September 30, 2013, while liquidity, defined as cash and cash equivalents plus availability under revolving credit facilities, totaled $1.45 billion compared to $1.77 billion at September 30, 2013.

Operating Highlights
Total contract backlog at December 31, 2013 was approximately $15.4 billion compared to $16.2 billion at September 30, 2013. The decline from the third quarter was due in part to a change in the bonus realization assumptions relating to contracts with Petrobras and Shell. The new bonus assumptions reflect the Company's recent history of bonus realization, more stringent regulatory requirements, especially in the U.S. Gulf of Mexico, and changing customer expectations.

During the fourth quarter of 2013, utilization of the Company's floating rig fleet (semisubmersibles and drillships) was 84 percent compared to 79 percent in the third quarter. Excluding the impact of two cold stacked floaters, utilization in the fourth quarter would have been 91 percent compared to 86 percent in the third quarter. The increase for the quarter primarily relates to the return to service of the semisubmersible Noble Homer Ferrington , which spent the majority of the quarter operating under a short-term contract in the Eastern Mediterranean following an idle period, and the drillship Noble Roger Eason , which in December returned to work offshore Brazil following the completion of a shipyard program. Average daily revenues in the floating rig fleet were $378,400 in the fourth quarter, or an improvement of approximately 3 percent from $369,100 in the third quarter, reflecting the commencement of operations on the ultra-deepwater drillship Noble Bob Douglas and a full quarter of operations on the Noble Don Taylor and the Noble Globetrotter II.

Fourth quarter 2013 utilization of the Company's jackup rig fleet was 86 percent compared to 94 percent in the third quarter. The decrease primarily relates to fewer operating days on the Noble Roy Rhodes, the Noble Roger Lewis, the Noble David Tinsley and the Noble Gene Rosser which is expected to be sold during the first quarter of 2014. The decrease in utilization was partially offset by a 3 percent improvement in average daily revenues during the quarter to $115,700 from $112,400 during the third quarter.

At the end of the fourth quarter of 2013, approximately 73 percent of the Company's available rig operating days were committed for 2014, including 78 percent of the floating rig days and 75 percent of the jackup rig days. For 2015, an estimated 44 percent of the available rig operating days were committed, including 61 percent and 38 percent of the floating and jackup rig days, respectively. The calculations for committed operating days include available days for two floaters and one jackup, all of which are currently cold stacked.

Outlook
Williams closed by stating, "After the very robust pace of offshore activity over the past four years, our industry may be entering a short and arguably useful pause in the cycle. As was the case in 2013, we entered this year with considerable backlog. That said, although we believe activity in the jackup sector is best defined as a steady state, the reality is that we find ourselves evaluating fewer floating rig contract opportunities today than we did a year ago. We expect to have additional contract opportunities under review as the year progresses, but it is increasingly clear that the first half of 2014 is likely to be characterized by lower rig utilization. The lower utilization is likely to be more pronounced for the floating rigs with limited technical features. Noble's exposure to a weaker floating rig sector is limited in 2014, with only 22 percent of our operating days available."

We are confident about the long-term outlook for offshore drilling and remain committed to a capital allocation strategy that promotes disciplined growth with strong returns and strategic appeal while offering the flexibility to consider other actions that promote enhanced shareholder value. In the ultra-deepwater segment, which represents a growing portion of our revenue, we continue to observe a fundamentally sound business. In the face of generally steady crude oil prices, successful exploration programs with over 240 announced deepwater discoveries since 2008, continued geographic expansion and a building backlog of field development projects, the segment is poised to provide exceptional future growth opportunities. Our transformation to a company with a predominately premium asset fleet positions Noble to successfully address the future opportunities in ultra-deepwater and high-specification jackup drilling applications."

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